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Interest Rate Stability – Brazil’s Selic rate went from 7.25% in 2012 to 14.25% in 2015. Obviously, during this period this made mortgage payments radically different between the time a buyer paid the deposit and when the buyer showed up for the loan at the end of the process. The current environment is much more stable and if anything interest rates are going down.
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There is an ongoing increase in poupança, a Brazilian savings account system where 65% of the deposits are directed to residential home financing and is the source of low-cost mortgage and construction debt capital. As poupança interest rates are fixed at a tax-free rate of roughly 6% per year, these savings accounts have already started to increase as Selic has reduced from 14.25% to today’s 8.25%.
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Small investor speculators are no longer a factor in the market. The price appreciation during construction does not justify the effort, capital, and risk required to speculate on multiple projects.
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As the economy improves and interest rates decrease, buyers that were on the sidelines during the downturn have returned to the market.
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